Entry in the ADHD drugs market: Welfare impact of generics and me-toos

Farasat Bokhari and Gary Fournier ()

No wp2009_05_01, Working Papers from Department of Economics, Florida State University

Abstract: Recent years have seen the growing popularity of drugs designed to treat attention deficit hyperactivity disorder (ADHD), and the number of patients, scripts, and revenues has been steadily increasing. By the mid-1990s there were already several branded drugs marketed for this disorder, as well as numerous generic formulations. With the expansion of the market in the late 1990s and early 2000s, new formulations (the so called `me-too' drugs) entered and caused dramatic changes in the distribution of market shares among available drugs. Using detailed sales data on psychostimulant drugs used to treat ADHD, we are able to identify and measure substitution patterns across a range of drugs. We find that the demand for ADHD drugs is fairly elastic and there are significant substitution possibilities among these drugs. Using estimates from demand parameters, we show that the first-time introduction of a generic drug can have large welfare gains due to the expansion of the market to price sensitive consumers. Additionally, the welfare gains due to the introduction of me-too drugs vary by the novelty of the drug, and for significantly new varieties can be larger than those of the introduction of a generic. Our results bear policy implications for both the speed with which new drugs are approved for marketing as well as for actions among pharmaceutical firms that may delay the entry of a generic drug.

Keywords: Differentiated products demand; multistage budgeting; AIDS model; psychostimulant drugs; new introductions; welfare analysis (search for similar items in EconPapers)
JEL-codes: I10 I18 L40 L50 L65 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2009-05
New Economics Papers: this item is included in nep-com, nep-hea and nep-mkt
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Citations: View citations in EconPapers (12)

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401546 First version, 2009-05 (application/pdf)

Related works:
Journal Article: Entry in the ADHD drugs market: Welfare impact of generics and me-too's (2013)
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